The Dominican Republic's customs agency plans to impose a new e-commerce tax ranging from 18 to 42 percent which the courier association says violates local law and CAFTA. (Photo: DGA)

Wednesday, August 13, 2014

Special Reports

Dominican Republic: Couriers Protest New Tax

Courier
companies and other groups say a new e-commerce tax is illegal.

BY LATINVEX
STAFF

Courier companies are opposing a new Dominican e-commerce
tax.

Dominican Customs on July 30 made a surprise announcement that as of August 15
all e-commerce purchases below $200 would be taxed. The move came despite a
decree from President Danilo Medina
that they were exempt. On August 13, a local court temporarily stopped the increase until it had a chance to review it completely.

“If approved and passed, this tax would have an impact in
trade and in Dominican Republic’s economy as a whole,” warns Romaine Seguin, president of the
Americas for logistics giantUPS.
“E-commerce continues to grow and provides new opportunities for growth in
Latin America and this measure would decrease sales and opportunities for the
growing middle class to purchase goods at competitive prices. If the de minimis is removed, it would result
in additional import duties and taxes on goods from treaty members resulting in
increased costs.”

US cargo airline Amerijet International, which will also
be impacted by the new measures, echoes similar warnings. “Every consumer when
making a purchase considers the cost and quality of the goods they are buying,”
says Pamela Rollins, senior vice
president for business development. “E-commerce purchases have traditionally
been discounted from traditional box store purchases. The consumer will always
look for ways to purchase items at the lowest price. Adding cost to the items
they are already used to purchasing from retailers abroad will make them
re-evaluate who they buy from and what they buy.”

Seguin says UPS was surprised by the new tax. “We were
surprised because we believe that this measure would have a negative impact for
Dominican Republic’s economic development,” she says. “The world is moving
towards e-commerce and the elimination of the de minimis to purchases made on the Internet are not in line with
the direction global trade is going.”

The express association and UPS will continue explaining the benefits of the de minimis to key members of Congress,
she added.

LEGAL MOTIONS AMIDST HARASSMENTS

On Monday, lawyers at the law firm of Russin, Vecchi & Heredia Bonetti
filed a motion at the Superior Administrative Court (TSA) on behalf of Dominican
courier association Asodec, asking it to stop the new tax. They say the new
measure violates a presidential decree, a local law and the Dominican
Republic-Central America-United States Free Trade Agreement (CAFTA-DR). Lead attorney María Esther Fernández says the measure
is “arbitrary” and “illegal.”

A similar motion had been presented last week by the
Dominican Chamber of Electronic Commerce (Cadolec), the Dominican Alliance for
the defense of consumers (Asodecu) and the Justice and Transparancy Foundation
(FJT).

TSA approved the motion on August 13 and will review the increase more completely at a later date, Asodec says.

Meanwhile, Asodec also says Customs has been harassing
its members, with extensive audits at the Dominican offices of courier
companies DHL, Fedex and UPS and Amerijet. Asodec spokeswoman Laura Castellanos told local newspaper Diario Libre the
“intimidating” audits are in retaliation for the group’s opposition to the new
tax.

In the latest move, Customs head Fernando Fernandez on Monday announced that the courier companies
may have violated money laundering laws after trying to ship more than 2,000 undeclared
checks worth 250 million pesos (US$5.7 million) into the country, Diario Libre reports.

Fernandez, who studied physics and mathematics at the
Patrice Lumumba university in Moscow, claims the government would lose 5.6
billion pesos (US$130 million) this year without the tax. However, Asodec says
the estimated value of tax exemptions this year is only a fraction of that.

Opponents of the new tax say local retailers charge exorbitant prices for the
same products e-commerce clients are buying. Meanwhile, local think tank CREES says the new tax will
reduce the purchasing power and savings of local consumers. The tax will range between
18 and 42 percent, according to Fernandez.

Asodec’s protests have been echoed by lawmakers and civil
society groups. Senate President Reynaldo Pared Perez – who is hoping to
succeed Medina in presidential elections in 2016 -- said it violated the
Dominican Constitution. “This is a measure that violates the Dominican
Constitution because only Congress can impose or eliminate tax measures,” he said.

Lawmaker Nelson Arroyo, spokesman for the opposition PRM
party, agrees and asked Medina to fire Fernandez. Former President Hipolito
Mejia also opposes the tax.